Revisiting Gas Credit Cards

I wrote a post a while back on the effectiveness of gas credit cards and wanted to revisit that topic. Gas prices plummeting in recent months and when you get a percent cash back, the actual dollars become less and less as the price goes down. When I initially wrote that post it was with the expectation of gasoline continuing to raise. This made cash back credit cards even more effective compared to paying with cash. With gas prices now heading in the opposite direction, things have flipped and cash may be king once again. But what exactly is the price point where this happens? I hope to analyze that and provide the answer for you in this blog post!

The first point I want to address right now is that if you don’t have a card that gives 5% cash back on gas, you should be applying for one or paying with cash instead. A 3% cash back card might cut it, and a 1% cash back card is not worth it in most cases. I recommend using the Sallie Mae MasterCard. The Chase Freedom and Discover It offer 5% cash back on gas during certain quarters of the year. There is also the PenFed Platinum Cash Rewards that give you 5% cash back if you have an account with them, as well as the Fort Knox card that always gives 5% cash back. So there are quite a few options out there for you to choose from.

The next important step is making sure that you always go to the cheapest gas station in your area, as cash back becomes sensitive to lower prices. The goal we are going for is to save money, isn’t it? Even if the Exxon near your house is charging both $2.15 for cash and credit, the other gas station a few blocks down charging $2.00 for cash and $2.05 is the better deal whether you are using either form of payment. So now let’s take a look at a few examples I created of using a cash back credit card or using just cash:

In each example the top highlighted price is representing the cash price at the pump , and the bottom represents the credit price you might be paying. I then included the amount of cash back you would receive from paying withe credit and then the total cost to you after cash back is applied.

The main takeaways for using credit cards to pay for gas are:

  • Only use credit if you have a 5% cash back card or if you live in an area where the cheapest gas station charges the same price for cash and credit.
  • Credit with cash back will always come out ahead if stations in your area have the prices equal
  • If credit prices are 10 cents higher than cash prices, you want to start using cash when gas approaches $2.00 a gallon
  • If credit prices are around 5-6 cents higher than cash prices, you will want to start using cash when gas approaches $1.20 a gallon (I wish!)
  • Always go to the cheapest possible gas station if you are going to be using credit (or cash). Check out www.gasbuddy.com and use their maps to find the best deals on gas near you.

I hope this helped once again and that you take advantage of cash back to save a few extra dollars at the gas pump!

photo credit: D.O’Brien via photopin cc

2 thoughts on “Revisiting Gas Credit Cards

  1. We use rewards cards, but I don’t necessarily focus on cards that offer rotating bonuses on gas. But that’s probably because we don’t drive very much. My husband works 5 minutes from work and drives a Prius, and I am self-employed and work at home. I *maybe* fill up my gas tank every three months

    • That’s awesome! I wish I had the “problem” that you speak of not driving enough, haha. Since I don’t spend enough to take advantage of sign up bonuses, I stick with straight cash back cards for now. I will definitely look into other rewards on travel and airfare once my spending increases.

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